With divorce occurring in roughly 50% of all marriages in the U.S., and life expectancy increasing every day, second—and even third—marriages are increasingly common. When those remarriages occur mid-life and beyond, they often bring children from prior marriages into the mix. These are known as a “blended” family or a “Brady Bunch” family. A few examples of other blended families would be stepchildren, adopted children, children from a previous relationship, or you have someone you consider “kin,” even though that individual might not be classified as your legal relative in the eyes of the law.
When two families merge, you naturally encounter some challenges and conflict. From an estate planning perspective, these families present a number of particularly challenging legal and financial issues.
Estate planning is absolutely essential for those with blended families.
If you have a blended family, and something happens to you without a carefully considered estate plan, your loved ones are at risk for significant misunderstanding and conflict, and having your assets tied up in court, instead of passing to those you want to receive them. Creating an estate plan that’s intentionally designed by an experienced lawyer (not an online document service) to keep your loved ones out of court and out of conflict, avoids causing your family heartache, confusion, and pain.
While you should meet with us, your Personal Family Lawyer® to plan for your particular family situation, here are a few of the most common issues blended families should keep in mind when creating or updating their estate plan.
1. Keeping Your Assets Separate
For those who have remarried and have children from a previous marriage, you need to think about how you want to balance providing for your new spouse and ensuring the children from your previous marriage receive an inheritance from you, in the event of your incapacity or when you die.
If you intend to keep your assets separate so each spouse can pass an inheritance to his or her own children, you’ll need to create and maintain separate financial accounts. For instance, one account contains the assets you want to pass on to your children, and the other can be either a separate or joint account that contains the assets you want to share with your new spouse.
Keep in mind, if you and your spouse commingle your income and assets, then the new spouse will have claim and control of those assets when you die. This easily leaves your kids with nothing. Moreover, joint accounts can be subject to claims from a former spouse and/or creditors, so unless you want your new spouse to share that risk, keep at least some of your assets separate. Since it can get somewhat tricky, be sure to talk with us, your Personal Family Lawyer® about the best ways to do that, particularly when you are sharing some assets and buying new assets together with your new spouse.
2. Issues With Inheritance Timing
Children for whom you want to leave an inheritance, you need to consider how and when you want those assets to be passed on. For example, what would happen if you die prematurely or if your spouse is significantly younger than you? Do you want your kids to wait until your new spouse dies to receive their inheritance, or do you want them to receive it immediately following your death? Perhaps you desire to create a hybrid in which your children receive a small inheritance at the time of your death, and they receive the rest upon the death of your new spouse.
Establishing trusts for the children of each spouse can protect those assets and stipulate when the kids receive their inheritance. You may want to provide your children with some of their inheritance, such as proceeds from a life insurance policy, upon your death, and then release the rest at some point in the future. Or if your kids are very young, you may decide to leave that decision up to your spouse or a third-party successor trustee, who can better determine the most advantageous time to pass on your children’s inheritance to them.
As your Personal Family Lawyer®, we will work with you, taking into account your unique family dynamics, assets, and potential areas of risk and conflict to help you determine the optimal time to pass on your wealth and other assets to your heirs to ensure it has the maximum benefit for everyone involved.
3. Carefully Consider Your Trustees
A common scenario for blended families is for one spouse to set up a revocable living trust that names themselves as the trustee during his or her lifetime, with the surviving spouse named as successor trustee once the first spouse dies. This would leave all decisions related to the trust assets to the surviving spouse, which could cause conflict with the children from your prior marriage.
For example, the new spouse may choose to invest the trust assets conservatively, ensuring he or she has enough money to live comfortably for a few decades, instead of investing the assets for growth. On the other hand, the children—particularly if they are younger—might be better off having the assets placed into higher-risk investments, which can offer better returns in the long run, but leave less income for the surviving spouse.
In this case, it could be best to name a neutral third-party as successor trustee, so both your children and surviving spouse’s interests can be balanced fairly.
4. Preventing Conflict
With blended families, the conflicting interests of your children and spouse can create serious strife between them in the event something happens to you. To reduce the likelihood of conflict, your estate plan needs to contain clear and unambiguous terms, spelling out the beneficiaries’ exact rights, along with the rights and responsibilities of executors and/or trustees. Such precise terms help ensure all parties know exactly what you intended.
Additionally, it’s essential that you meet with all affected parties within your blended family while you’re still alive (and of sound mind) to clearly explain your wishes directly. Sharing your intentions and hopes for the future with your new spouse and children from a prior marriage can go a long way in preventing disagreements over your wishes for each of them.
As your Personal Family Lawyer®, we can even facilitate these meetings to help ensure your blended family maintains a harmonious relationship no matter what happens to you.
5. Planning For Incapacity
In addition to planning for your eventual death, you must also plan for your potential incapacity. In this case, you’ll need to discuss how planning vehicles for your incapacity, such as a durable financial power of attorney, a living will, and medical power of attorney, will be handled.
For example, if you become incapacitated, who would you want to make your legal, financial, and medical decisions for you? If your children are young, it’s best to leave those decisions up to your surviving spouse. However, if your children are older, you may want them included in the discussion of how such decisions will be made. Or you may prefer to name one of your adult children as your decision maker, or you might divide the different duties between your spouse and adult children.
Regardless of what you choose, we can support you to create an estate plan that ensures your incapacity will be managed exactly how you would want in every possible scenario.
Bringing Families Together
Along with other major life events like births, deaths, and divorce, entering into another marriage requires you to carefully review and rework your estate plan. Updating your plan is exponentially more important when there are children involved.
As your Personal Family Lawyer®, we’ve been specially trained to counsel blended families on how to properly protect their assets in a manner that’s best for both the spouse and any children involved. We will ensure that you and your new spouse can clearly document and communicate your wishes to avoid any confusion or conflict over how assets and/or legal agency will be managed and passed on in the event of one spouse’s death or incapacity.
If you have a blended family, or are in the process of merging two families into one, sit down with us, your Personal Family Lawyer® to discuss your different planning options. Contact us today to schedule your visit.
This article is a service of Ashley DeBoard, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.